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10 Cards in this Set
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Present Value of $1

Amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future.

Ex's: capital lease buyout (at end of lease), bond principal payoff at end of term, U.S. savings bond.


Future Value of $1

More easily understood as compound interest. Amount that would accumulate at a future point in time if $1 were invested now.

Interest factor causes the future value of $1 to be greater than $1.
Ex: bank savings account 

Present Value of an Ordinary Annuity

Current worth of a series of identical periodic payments to be made in the future.
Payments are made at the end of each period (also called "annuity in arrears"). 
Ex's: periodic lease payments, periodic bond payments, winning the lottery.


Future Value of an Ordinary Annuity

The sum, to be received at some point in the future, of identical periodic investments made from the present until that future point.

Payments are made at the end of each period (also called "annuity in arrears").
Ex: investing in an IRA. 

PV & FV of Annuity Due

Only difference from an ordinary annuity is the timing of payments.
By adding 1.00 to the PV of an ordinary annuity of 1 for n periods, the PV of an annuity due of 1 for n + 1 periods may be found. 
Payments/receipts occur at the beginning of each period (also called "annuity in advance").


Present Value of $1

Amount that must be invested now at a specific interest rate so that $1 can be paid or received in the future.

Ex's: capital lease buyout (at end of lease), bond principal payoff at end of term, U.S. savings bond.


Future Value of $1

More easily understood as compound interest. Amount that would accumulate at a future point in time if $1 were invested now.

Interest factor causes the future value of $1 to be greater than $1.
Ex: bank savings account 

Present Value of an Ordinary Annuity

Current worth of a series of identical periodic payments to be made in the future.
Payments are made at the end of each period (also called "annuity in arrears"). 
Ex's: periodic lease payments, periodic bond payments, winning the lottery.


Future Value of an Ordinary Annuity

The sum, to be received at some point in the future, of identical periodic investments made from the present until that future point.

Payments are made at the end of each period (also called "annuity in arrears").
Ex: investing in an IRA. 

PV & FV of Annuity Due

Only difference from an ordinary annuity is the timing of payments.
By adding 1.00 to the PV of an ordinary annuity of 1 for n periods, the PV of an annuity due of 1 for n + 1 periods may be found. 
Payments/receipts occur at the beginning of each period (also called "annuity in advance").
